Seoul: Finance Minister Koo Yun-cheol called on domestic petrochemical companies Wednesday to undertake excruciating self-restructuring efforts, saying the government is ready to cooperate with the private sector to revive the struggling industry.
According to Yonhap News Agency, Koo made the remarks while presiding over a ministerial-level meeting to discuss comprehensive measures to overhaul the country's petrochemical sector that has faced a prolonged downturn due to an oversupply triggered by the global oversupply glut.
"Despite clear warning signs of a global oversupply from China and the Middle East, the domestic petrochemical industry clung to past booms and even expanded facilities, leading to serious challenges," Koo said.
Later in the day, the government is scheduled to sign a business restructuring agreement with 10 major petrochemical companies. Under the deal, each firm is expected to submit a detailed restructuring plan by the end of the year, with the collective goal of reducing up to 3.7 million tons of naphtha cracking center production capacity.
"The industry must voluntarily come up with a detailed plan in a swift manner," the minister said, urging "bone-grinding" self-rescue efforts from the companies and major shareholders.
Koo noted that if companies pursue sincere business readjustments, the government will fully support them through measures that include deregulation, financial assistance, and tax incentives.
South Korea is one of the world's largest importers of naphtha, a derivative of crude oil that is refined into chemical products used in plastics for various materials, such as automobiles, electronics, and clothing.
The minister also urged the petrochemical industry to draw lessons from the restructuring of South Korea's shipbuilding sector in previous years. At the time, shipbuilders underwent painful reforms, including asset sales and the consolidation of business units, in response to falling global demand.
"Let's work together to bring about a new leap forward for the petrochemical industry," Koo said, noting the petrochemical industry can also achieve a dramatic rebound if it follows the path taken by the shipbuilding sector.
The domestic petrochemical industry has been in a sustained slump due to slowing global demand and massive facility expansions in China and the Middle East, leading to supply-demand imbalances.
Recently, Yeochun NCC Co., a joint venture between Hanwha Group and DL Group, faced a liquidity crisis that forced its shareholders to extend emergency financial support.